Is Economics in Search of Order?

In qualified columns and academic publications, the point that capitalism has reached is being questioned. The highly conscious segments of society are discussing the social benefits of capitalism. Because there are important social problems on a global scale. The underlying causes of these problems are significant inequalities. These questions and discussions are not taking place for the first time.

Inequalities have many causes, resulting from the interplay of economics, politics and, increasingly, environmental factors.

History is a mirror. It helps us understand current developments. Capitalism has gone through many turning points . Today, it is at a significant turning point. This time, with the lessons of a 250-year history.

The basis of the attempts to replace the approaches classified as “mainstream” in economic literature with new approaches lies in the search for solutions to the social problems of humanity. The reason why mainstream economics is called mainstream is that some economic schools belonging to this trend have found widespread application on a global scale over a long period of time. It became more widespread with the collapse of communist regimes after the Cold War.

There is no single economic school of the “heterodox” approaches that are opposed to the mainstream in economic thought. The word heterodox comes from the Greek. Heter means different, and doxa means idea. Heterodox means “different idea” that departs from the traditional, the commonly accepted. The distinction between orthodox and heterodox is not only in economics. In all sciences, different ideas that oppose traditional approaches can be classified with the same qualifications.

Heterodox approaches include, for example, Marxist doctrine. The Communist Manifesto was published in 1848. Heterodox schools of economics, such as feminist economics, environmental economics, post-Keynesian economics, etc., did not emerge in the 2020s. The topics that these different schools of economics focus on are so different that it is not possible to make a one-to-one comparison in all of them.

Let's go back to history. Let's try to look at the current crisis of capitalism through historical developments.

Industrial revolutions began in the 1750s. Today, we are in the fourth. Economics has existed as long as humans have. However, scientific economics began with Adam Smith's Wealth of Nations published in 1776. Capitalism, which developed immediately after the first industrial revolution in the 1750s, harmed the working class. The process created Marx.

Between 1870 and 1920, another school called neoclassical lived. It was a continuation of the classical economic tradition that began with Adam Smith in terms of commitment to the free market. Neoclassical economics developed the scientific qualities of economics. In this development process, it was influenced by Newton and Darwin and began to form the "method" foundations of science for itself. Most of those who created economics were biologists, mathematicians, meteorologists, etc.

There were also changes in the natural sciences. Those who were called "natural philosophers" were first called scientists by William Whewell in 1833.

What was the world like in the years when neoclassical economics developed?

With industrialization, sectors spread over a wide geography were formed. In other words, globalization was taking place.

With globalization, the number of countries participating in international trade was increasing. England was losing its distinction as the only industrialized country. By 1913, the USA had a 46% share in world trade, Germany 23.5%, England 19.5% and France 11%. England was trying to make up for its loss in international trade by providing services in trade financing and logistics.

Great strides were being made in technology. The telephone, telegraph, phonograph, and cinema were inventions of the period. There were important inventions in the automotive, aviation, and pharmaceutical sectors. Aspirin was invented in 1899, and the vacuum cleaner in 1908. The second industrial revolution improved what was found in the first, but with an important difference. Mass production was beginning in manufacturing sectors.

Mass production was triggering change and new approaches in production organizations. The use of scientific methods in business management was beginning.

With industrialization and mass production, income was increasing, urbanization was gaining momentum, and the population was increasing. The quantity and quality of consumer goods were changing. For example, Sir Thomas Lipton's stores began selling tea on a certain scale and the number of stores reached 500 in 1899.

After agriculture and industry, there was a major transformation in the service sector. The white-collar working class was formed and grew.

The state's weight in economic policies was increasing. The free market approach that began with Adam Smith brought about the questioning of capitalism from the 1870s onwards. From 1860 onwards, workers' unions were banned from organizing in England and wage increases were suppressed. The labor market was not operating under free market conditions.

Between 1870 and 1914, an imperialist expansion took place. Therefore, it was thought that the free market economy was an imperialist theory in those years. Neoclassicals also supported free trade. During the industrialization process, England created low-cost resources through its colonies.

As the developments of the late 19th century unfolded, crises were also occurring. Then came two world wars and a great depression . The depression created Keynesian economics . Keynesian economics is also classified as part of the mainstream. However, for example, Piero Sraffa 's critique of neoclassical economics, who lived from 1898 to 1983, became part of heterodox economics. Rudolf Hilferding published Finance Capital in 1919 and questioned capitalism, arguing that capital is monopolistic.

Similar developments to the historical developments described above also occurred after the 1980s. Crises, regional wars occurred, and a return to the Cold War era occurred. Even a Third World War, the possibility of which was calculated based on the Russia-Ukraine war, became debatable.

While developments similar to those of the last 40 years have been seen since the 1870s, humanity's experience with capitalism was approximately 120 years. Now, it is approximately 250 years.

Capitalism advances when the political environment is stable and it finds areas to move freely. As the democratic qualities of politics increase , it feeds more on order. Does it contribute to political stability or democracy? Didn't the wars and crises that emerged after the developments in the late 19th century also emerge with the developments after the 1980s?

While humanity's experience with capitalism is only 120 years old, aren't the concerns about environmental problems reflected in the press at the beginning of the 20th century causing articles to be written today about the possibility of the end of the human species? As capitalism collapses, do the inequalities it creates while recreating itself with inventions and technological developments stem from its incorrect application or, as Hilferding claims, its monopolistic nature? Haven't there been tendencies towards monopolization in capital as technology has advanced with the developments after the 1980s?

When analyzing the crisis of capitalism, it is necessary to remember that socialist and communist regimes have created undemocratic and inefficient systems within the framework of historical experiences. While the management of the factors of production is in the hands of the state, it is important to include in the analysis the determination that there are ruling classes that use this power with undemocratic methods in order to be objective.

If the problems cannot be solved by any system, then the problem is in human nature. Another window opens there: political economy through the window of behavioral economics. With the old and the new .

Should the capitalist system be regulated in an egalitarian direction or should the system be changed? This question is not new, but there is no common answer that humanity has agreed on yet. From here comes moral philosophy. Behavioral economics and moral philosophy work together from this point on. Unless this is fixed, it is not possible for any system to work in favor of humanity. Capitalism, communism, socialism, and social democracy have been able to provide equal benefits to humanity within the framework of human nature, but only partially at certain times.

While humanity searches for the ideal economic and political order point by questioning the lessons from history, environmental problems will not allow it to reach that point. Environmental problems are now at a place important enough to be the reason for an inevitable system change. If inevitable system changes occur, perhaps more egalitarian but also more regressive democracies will exist.

Regardless of the system in place, the existence of institutions that establish democratic, participatory and egalitarian principles and cross-control mechanisms is a necessity. This also gives way to institutional economics.